2016 Payback Period

In my last analysis, payback period was about 16 years, excluding the pricing of carbon.

Environmental impact should always be priced when examining new projects. Ignoring environmental impact is naive and dangerous. Carbon pricing is one way to do this.

However, this isn’t money that people directly see in their pocket, so I recognize it is harder to grasp than direct savings on a power bill.

2018 Solar Payback Period Calculations

The new calculations are summarized in two spreadsheets linked below.

I would encourage you to make a copy (File > Make a Copy), use the data sources provided in my previous article, and fill in the spreadsheet using values that apply to your own location, home size, anticipated installation size, etc.

The first spreadsheet calculates the payback period relying on direct cost savings only (via the power saved on your bill). In addition, it shows the equivalent “investment return”, which I’ll explain later.

The second spreadsheet takes into account carbon pricing (sources can be seen in previous post).

If we look at the cost of purchasing solar purely as an investment (which I’ve added in both spreadsheets above), we see that on direct costs, solar panels will provide an average 5.18% return over 25 years.

I’d bet this is better than the return of most average investors, and much steadier than the stock market!

As a reminder, this also excludes the other benefits (environmental impact, home value increase, etc.).

(Disclaimer: Keep in mind steady/decreasing power rates will negatively affect this return - make sure to understand the factors in the spreadsheet).

Conclusion: Solar if You Can

With the current solar efficiency and rebate program, the only reason I can see not to invest in solar is if you don’t have the up-front capital.

Even then, to figure out whether it’s feasible, you can find out your cost of capital and subtract that from the expected returns of solar. If you can finance it through a mortgage when purchasing or building a new home, or in a similarly beneficial way, it may still make sense. Check with your local banker/accountant.

In a time where environmental concerns should be top-of-mind for everyone, it’s encouraging to see that technology like solar has reached a point where it makes sense for even the most pessimistic buyers.